Expat savers threatened by holes in offshore banks

Published:  25 Jun at 6 PM
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Tagged: UK, Money, England
Expat savers who are already suffering from miniscule interest rates and a lack of choice could be hit again via shortfalls in UK banks' balance sheets.

Turbulence in the UK banking sector looks set to have yet another effect on offshore savings accounts held by expatriates. The UK’s Prudential Regulation Authority has discovered gaping holes in the balance sheets of several of the remaining banks offering expat savings accounts based offshore.

The capital requirements of five major UK banking entities, Royal Bank of Scotland, Nationwide Building Society, Co-operative Bank, Lloyds Banking Group and Barclays, are all showing less than is needed. The total shortfall, according the regulator, is around £27 billion.

All five banks maintain a presence offshore, as do the two banks, Santander and HSBC, identified as having no shortfall. According to the regulator, the five have already laid plans to fill £13.7 billions’ worth of black holes, and four, not including Nationwide, are being asked to declare how they will finance the balance.

Although none have made comments as to their plans for their offshore arms, all of which are still attracting savers, pulling out of offshore has its potential as a big money saver. Several building societies and banks have already closed their offshore operation, citing money-saving as the reason.

The Clydesdale and Yorkshire building societies left after reviews based on profit versus loss offshore indicated that costs outweighed their value to the businesses as a whole. If the trend continues, expats with savings offshore will find the present poor choice even more limited.

The good news is that, at present, offshore interest rates are at least stabilizing, albeit at a historically low level. The best available on a five year fixed rate is 1.92 per cent, contrasting with last year’s 4.5 fix with Lloyds Bank International who are now only offering low variable rates.
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